8 ms·

Why does it matter to actual people what the cause is? If you’re poor and gas costs $7 you’re fucked, regardless of whose fault it is.

dragonwriter 5y ago
> Why does it matter to actual people what the cause is? Because we live in a representative democracy and policy responses are likely to be a significant electoral issue.
- ThunderSizzle 5y ago
  If people wanted to vote to keep peace and a stable economy, they probably wouldn't have voted for Biden. Supposedly a majority voted for this and are now complaining about what they voted for. Maybe they didn't vote for this and voter fraud really did happen...
jahnu 5y ago
One reason why it matters is so you can make predictions and plan accordingly. If it is because of a short term shock or a medium term problem or a long term global configuration change then your response to $7 gas will likely be radically different.
- seanp2k2 5y ago
  I guess… If it’s a short-term problem and you’re living paycheck to paycheck, you’re screwed now but might be OKish in the future. If it’s a long-term problem and you’re living paycheck to paycheck you’re screwed for longer. Honestly, what’s the play here for someone who doesn’t own any significant assets and barely makes enough to pay bills each month? That’s what I read as OP’s point.
  - prepend 5y ago
    One thing is paying a gas bill. In my state, I can lock in a price for 6,12,18, etc months. Or I can pay month to month. If I’m living paycheck to paycheck and my current term runs up, I would go month to month if this is a short term spike since prices should recover soon. But if it’s long -term, I should go ahead and lock in now because it won’t get better. There are tons of those examples. Even people with no assets and just living month to month can use this information. Obviously, billionaires are impacted more, but people might literally be trying to figure out if they just skip meat for a month (short term) or buy a bicycle (long term).
kleiba 5y ago
$7? Puh! Last week it was up to $9 over in Germany.
- seattle_spring 5y ago
  ... in Germany, a country with actual usable and comprehensive public transit alternatives.
  - xyzzyz 5y ago
    The public transit alternatives in Germany are just as expensive. Take a train in Germany and see for yourself.
    - seattle_spring 5y ago
      The point is that you have the option. Most people in the US do not. I also find it hard to believe that a bus / train pass costs as much as car ownership fwiw
      - xyzzyz 5y ago
        Total cost of ownership of a car will likely be higher (especially if it’s a nicer car, and you use it in places where you need to pay for parking), but public transit and cars are not exactly equivalent products. Public transit can be very cheap and convenient for some use cases: for example, if you live close to a stop, your destination is close to a stop, there is straight transit line between the two places, it runs frequently and has few stops on the way, and you usually travel by yourself. If all of the above is satisfied, it will likely to be more cost effective and similarly convenient to use public transit. However, for many other standard use cases, public transit is by nature very inconvenient compared to cars: for example, if you visit grandma with your small kids on a regular basis, grandma lives in a small town, getting to which on public transit from your home requires 2 transfers, and is only reasonably possible twice a day at very particular times. In that scenario, which, by the way, is (in some form) extremely common for most people who aren’t single professionals living in big city, public transit is just a non starter, even in Germany. Since the latter scenario is, as I point out, rather common, most people own a car anyway. At that point, you’re already paying the total cost of ownership just to use it on routes where public transit is extremely inconvenient. This changes your calculation on routes where public transit actually is pretty convenient: sure, public transit on that route might win with total cost ownership of the car, but once you already have a car, fixed costs are already sunk, so public transit is now competing with marginal costs, and it might very well then lose. For this reason, even in countries with good public transit, it is largely a domain of students, young singles, and retirees, and working people with families overwhelmingly own and use cars.
lottin 5y ago
Are you still talking about inflation? Inflation is change in nominal prices, it doesn't affect the cost of living.
- xyzzyz 5y ago
  As it turns out, people are paid in nominal dollars, not real ones, and what happens id the nominal prices go up, while wages stay stagnant in nominal terms, so they fall in real terms.
  - lottin 5y ago
    Prices can only go up if there is buying pressure, which means an increase in disposable income must precede the increase in prices.
    - xyzzyz 5y ago
      Yes, printing a whole lot of new money tends to do that. As it happens, though, wage workers are not the first one who get a hold of that new paper. It does, in a way, trickle down to them. It’s only after the prices go up, and competitors start offering higher wages, they get any leverage to get a raise in their current job. This means that and wages will, on the whole, lag after inflation.
      - lottin 5y ago
        That's not how monetary policy works. The "new paper" that is "printed" by the central bank is traded for a financial asset, typically a bond. The counterparty which previously had a bond, now has cash. It's unclear how the counterparty can take advantage of this situation at the expense of everybody else (which is what you suggest is happening).
- anm89 5y ago
  Out of all the arguments I'm seeing on here, this feels particularly bad faith. Throughout my maybe decade and a half in the macro world I've never heard anyone even attempt to make this argument. Inflation clearly affects cost of living because wages are stickier than prices. You don't walk into work every monday morning and get your wages increased by CPI.
shagie 5y ago
The question is how do you fix it? If you don't understand the cause for it, then attempts to fix the not-cause may cause more or bigger problems in other parts of the economy. This is in part complicated because there isn't necessarily one cause. If it was caused simply because the supply chain shock from different spending habits of consumers from the pandemic, then that would sort itself out as the supply chain adapts to the different habits - going from just in time to just in case in many places. If it was caused by an increase in energy prices, then increasing supply (and importantly, having the existing energy reserves be used). (and so on) The other side to this is the managing expectations. If you know that you can't fix it by just adding more oil to the market, then that data can be used to manage the expectations for all parts of the economy. "No, this isn't going to get better for some time" is a valid answer.

dragonwriter 5y ago

> Why does it matter to actual people what the cause is? Because we live in a representative democracy and policy responses are likely to be a significant electoral issue.

ThunderSizzle 5y ago
If people wanted to vote to keep peace and a stable economy, they probably wouldn't have voted for Biden. Supposedly a majority voted for this and are now complaining about what they voted for. Maybe they didn't vote for this and voter fraud really did happen...

jahnu 5y ago

One reason why it matters is so you can make predictions and plan accordingly. If it is because of a short term shock or a medium term problem or a long term global configuration change then your response to $7 gas will likely be radically different.

seanp2k2 5y ago
I guess… If it’s a short-term problem and you’re living paycheck to paycheck, you’re screwed now but might be OKish in the future. If it’s a long-term problem and you’re living paycheck to paycheck you’re screwed for longer. Honestly, what’s the play here for someone who doesn’t own any significant assets and barely makes enough to pay bills each month? That’s what I read as OP’s point.
- prepend 5y ago
  One thing is paying a gas bill. In my state, I can lock in a price for 6,12,18, etc months. Or I can pay month to month. If I’m living paycheck to paycheck and my current term runs up, I would go month to month if this is a short term spike since prices should recover soon. But if it’s long -term, I should go ahead and lock in now because it won’t get better. There are tons of those examples. Even people with no assets and just living month to month can use this information. Obviously, billionaires are impacted more, but people might literally be trying to figure out if they just skip meat for a month (short term) or buy a bicycle (long term).

kleiba 5y ago

$7? Puh! Last week it was up to $9 over in Germany.

seattle_spring 5y ago
... in Germany, a country with actual usable and comprehensive public transit alternatives.
- xyzzyz 5y ago
  The public transit alternatives in Germany are just as expensive. Take a train in Germany and see for yourself.
  - seattle_spring 5y ago
    The point is that you have the option. Most people in the US do not. I also find it hard to believe that a bus / train pass costs as much as car ownership fwiw
    - xyzzyz 5y ago
      Total cost of ownership of a car will likely be higher (especially if it’s a nicer car, and you use it in places where you need to pay for parking), but public transit and cars are not exactly equivalent products. Public transit can be very cheap and convenient for some use cases: for example, if you live close to a stop, your destination is close to a stop, there is straight transit line between the two places, it runs frequently and has few stops on the way, and you usually travel by yourself. If all of the above is satisfied, it will likely to be more cost effective and similarly convenient to use public transit. However, for many other standard use cases, public transit is by nature very inconvenient compared to cars: for example, if you visit grandma with your small kids on a regular basis, grandma lives in a small town, getting to which on public transit from your home requires 2 transfers, and is only reasonably possible twice a day at very particular times. In that scenario, which, by the way, is (in some form) extremely common for most people who aren’t single professionals living in big city, public transit is just a non starter, even in Germany. Since the latter scenario is, as I point out, rather common, most people own a car anyway. At that point, you’re already paying the total cost of ownership just to use it on routes where public transit is extremely inconvenient. This changes your calculation on routes where public transit actually is pretty convenient: sure, public transit on that route might win with total cost ownership of the car, but once you already have a car, fixed costs are already sunk, so public transit is now competing with marginal costs, and it might very well then lose. For this reason, even in countries with good public transit, it is largely a domain of students, young singles, and retirees, and working people with families overwhelmingly own and use cars.

lottin 5y ago

Are you still talking about inflation? Inflation is change in nominal prices, it doesn't affect the cost of living.

xyzzyz 5y ago
As it turns out, people are paid in nominal dollars, not real ones, and what happens id the nominal prices go up, while wages stay stagnant in nominal terms, so they fall in real terms.
- lottin 5y ago
  Prices can only go up if there is buying pressure, which means an increase in disposable income must precede the increase in prices.
  - xyzzyz 5y ago
    Yes, printing a whole lot of new money tends to do that. As it happens, though, wage workers are not the first one who get a hold of that new paper. It does, in a way, trickle down to them. It’s only after the prices go up, and competitors start offering higher wages, they get any leverage to get a raise in their current job. This means that and wages will, on the whole, lag after inflation.
    - lottin 5y ago
      That's not how monetary policy works. The "new paper" that is "printed" by the central bank is traded for a financial asset, typically a bond. The counterparty which previously had a bond, now has cash. It's unclear how the counterparty can take advantage of this situation at the expense of everybody else (which is what you suggest is happening).
anm89 5y ago
Out of all the arguments I'm seeing on here, this feels particularly bad faith. Throughout my maybe decade and a half in the macro world I've never heard anyone even attempt to make this argument. Inflation clearly affects cost of living because wages are stickier than prices. You don't walk into work every monday morning and get your wages increased by CPI.

shagie 5y ago

The question is how do you fix it? If you don't understand the cause for it, then attempts to fix the not-cause may cause more or bigger problems in other parts of the economy. This is in part complicated because there isn't necessarily one cause. If it was caused simply because the supply chain shock from different spending habits of consumers from the pandemic, then that would sort itself out as the supply chain adapts to the different habits - going from just in time to just in case in many places. If it was caused by an increase in energy prices, then increasing supply (and importantly, having the existing energy reserves be used). (and so on) The other side to this is the managing expectations. If you know that you can't fix it by just adding more oil to the market, then that data can be used to manage the expectations for all parts of the economy. "No, this isn't going to get better for some time" is a valid answer.